Despite political rift, Greece and Turkey develop closer energy ties

Although there are divergent views by Greek politicians and media as to the usefulness of the visit to Greece last week by Turkey’s President Recep Tayyip Erdogan, the first such visit in more than 60 years, it seems that overall and in spite of certain inevitable tensions, it brought the two sides closer together at a political and economic level.

After all, Athens’s willingness to upgrade and improve Greek-Turkish relations was the main reason for inviting the Turkish President in the first place to Greece. Hence, it was prepared to discuss all major issues weighing on relations between the two countries, whether bilateral differences or with an international dimension such as the Cyprus problem and the refugee crisis.

On the political side, Greece had the opportunity to state its positions on a number of contentious issues, including the delineation of sea boundaries in the Aegean on the basis of the provisions foreseen by the UN Law of the Sea (UNCLOS), on refuges and on maritime and human security in the Aegean along the lines already agreed in the context of the 2015 agreement between Turkey and the EU, and of course on the infallibility of the Lausanne Agreement which defines the borders between Greece and Turkey and remains a pillar of the two countries’ relationship on several counts.

The visit also provided Erdogan the opportunity to show similar intentions and at the same time demonstrate the necessary prudence, thus reinforcing his statesman status back home. Although expansionist in his rhetoric when dealing with such issues as the Lausanne Agreement, which according to Erdogan needs to be updated to conform to Turkey’s fresh view of the world, the Turkish President understands that Greece can play a role in the Euro-Turkish puzzle. Since at a time when many European countries do not want Turkey – and many of them have stated that in no uncertain terms – Greece opposes an all-out rupture in relations and has consistently said that the link between the EU and Turkey should be preserved, even if it seems that the country’s full integration into the bloc is tortuous, to say the least. In this sense, Erdogan’s diplomatic gains from his visit to Greece, apart from strengthening his position at home, have been routed more towards a European audience, which he is eager to convince of his country’s benign intentions.

Trade links indicative of bilateral climate

In this context, Turkey’s fast developing economic and trade links with Greece, over a diverse range of products and services, is indicative of the improving bilateral climate where energy, along with tourism, form the basis of continuing strong interaction between companies and businesses.

Top on the bilateral energy agenda during Erdogan’s meetings with the Greek government was the growing cooperation on natural gas, as Greece is already linked with Turkey’s vast gas network through an interconnector which this year completes ten years of continuous operation. The 280km interconnector links the Greek city of Alexandroupolis in the north to Karacebey, on Turkey’s Asian side and through that, Greece receives some 0.75 BCM (billion cubic metres) of gas annually which corresponds to some 15% to 18% of its total gas needs, the rest being provided by Russia and also by means of LNG. However, this vital gas link remains underutilised since its total capacity exceeds 5.0 BCM.

By the end of 2019, when the big TANAP-TAP pipeline system will be completed, Greece will be linked even more to Turkey, as the TAP pipeline will cross Greece to ship Azeri gas to European markets, with some 10 BCM of gas quantities being transported via the TANAP pipeline through Turkey. Consequently, the strategic importance of the Greek-Turkish gas link becomes hugely important for the gas supply of Europe, even though the total gas quantities to be initially transported through TANAP-TAP will hardly meet 3% of European gas demand.

In addition to its gas link to Turkey, five years ago Greece got its electricity connection to Turkey fully activated through a 400 KV high tension electricity cable. This has enabled Turkey to link its extensive electricity grid to the European one through a synchronous connection arrangement. Since then, Greece has been steadily importing certain electricity quantities corresponding to almost 7% of its total electricity imports, which cover approximately 10% of its electricity mix. However, once Turkey completes its two huge nuclear power complexes by 2023/2024 – of some 9.0 GW of installed capacity between them – it will become a net electricity exporter to Europe and hence its connection to Greece will acquire added significance.

Another area of successful Greek-Turkish cooperation is that of trading in oil products and services as Turkey, in spite of an extended refining sector, remains short on gasoline and diesel and hence imports sizeable quantities from Greece’s two leading refining groups, Hellenic Petroleum and Motoroil.

Turkey an important destination

Currently, Greek refiners export some 8.0 million tons per year primarily to SE Europe and north Africa, which corresponds to some 60% of their total production, with Turkey being an important destination. According to market sources, it is estimated that Greek oil product exports to Turkey amounted to about EUR 2.0 bln in 2016.

It would be an omission not to mention the growing cooperation between the two countries in the area of renewable energy sources (RES), where the emphasis so far has been on wind energy and solar photovoltaics.

A number of Greek companies have been investing in Turkey’s buoyant RES sector with corresponding Turkish companies buying up Greek photovoltaic parks. Lately, T Egnatia, a joint Greek-Turkish RES company, has become quite active as an engineering, procurement and construction (EPC) contractor specialising on huge photovoltaic installations pursuing projects not only in Turkey, but also in Iran and in the Gulf region.

On the surface, it may appear that Greece and Turkey harbour vertically opposing views on highly volatile issues such as the definition of respective Economic Exclusion Zones (EEZ) in the Aegean sea, which incidentally, they agreed during Erdogan’s visit to re-address by starting fresh exploratory talks. But when it comes to trade and economic ties, both countries are quietly furthering their energy business on a day-to-day basis. Perhaps, the strengthening of economic and commercial cooperation between the two old adversaries could, after all, be the key to resolving apparently intractable issues.

Costis Stambolis is a Financial Mirror correspondent, based in Athens.